Asia Day Ahead: HSI to face key test at 18,000 level, STI maintains upward bias

Asia Open

The Asian session looks set for a muted start in today’s session, with Nikkei -0.20%, ASX +0.05% and KOSPI -0.28% at the time of writing. Investors paring some exposure in US tech stocks ahead of Nvidia’s earnings has been the headline for Wall Street, with the mixed close across major US indices overnight not offering much positivity for the Asian session. Expectations are for another stellar quarter for the artificial intelligence (AI) darling, but the usual questions will revolve around whether it can deliver more than what markets expect and offer a strong outlook to justify its lofty valuation. Investors are looking for a 112% increase in revenue and a 136% increase in earnings from a year ago.

The sell-off in the US dollar has taken a pause for now amid a slight uptick in Treasury yields, while oil prices surged close to 3% on Middle East tensions and production halt in Libya, all of which could drive risk sentiments to put on a more subdued front. Markets also have to digest trade relations between China and the West, with Canada joining its counterparts to impose tariffs on Chinese electric cars and imports of steel and aluminium products, which added a layer of uncertainty over further trade decoupling.

For now, China’s previous response to European Union’s tariffs seems limited and leans towards a “less painful” option, which may suggest some reservations in over-escalating trade tensions. This may come as China’s growth is still reliant on external demand amid weak domestic consumption, and any tit-for-tat trade barriers may further complicate its economic recovery at a time where its growth target is seemingly in jeopardy.

Hang Seng Index (HSI) to face key test at 18,000 level

The HSI has managed to stay resilient thus far, with a break above a near-term descending channel pattern and a recent retest of the channel trendline was met with some defending. Buyers still retain some control for now, with its daily relative strength index (RSI) trading above its mid-line since July this year. That said, a resistance confluence will likely be presented at the 18,000 level from its daily Ichimoku Cloud and 100-day moving average (MA). Failure to overcome this level may see a move back towards the 17,200 for immediate support.

Straits Times Index (STI) eyeing 3,460 level

The STI has gained more than 6% over the past weeks, with its daily RSI reverting back above the mid-line as a sign of buyers in control. This follows after a bounce in the index off an upward trendline support, with the formation of a new higher low keeping the near-term upward trend intact. Buyers may eye for a retest of the 3,460 level next, which marked its previous tops back in February and March 2022. On any downside, the 3,345 level (recent gap-up) may serve as near-term support to hold.